Economist Saul Eslake - Head of strategy Gerhard Vorster at Deloitte - Talking Business 2012 - Ep15

Summary: Interview with economist Saul Eslake on the Budget Interview with Deloitte head of strategy Gerhard Vorster who is also chair of the RMIT Industry Advisory Board Leon and Garry talk about issues including: Europe is now in for a period of uncertainty with the election of socialist leader Francois Hollande and a parliamentary election in Greece delivering a second hammer blow to Europe's political order, with voters flocking to anti-austerity candidates at the expense of the two traditional ruling parties. The Gillard government has upheld its promise to return the federal budget to surplus in fiscal 2013, in the largest budget turnaround in over 50 years, despite a larger than expected deficit forecast for the current year. Wayne Swan has dumped a promised company tax cut to help pay for $5 billion in handouts to Labor's heartland and scrape together Budget surpluses from next year. To deliver its promised surplus the Government will have to pull off the biggest fiscal consolidation since the 1950s, and as usual, much will depend on the forecasts. This year’s Federal Budget surplus depends on on GDP growth of 3.25 per cent for 2012-13. That’s almost one percentage point higher than the growth rate last calendar year. In its fifth budget, the Labor government has moved to boost productivity, following weaker than expected company tax receipts for the current year. The business investment boom is expected to reach an all-time high this year. The budget delivered in Canberra reveals investment will surge again, as companies cash in on the second phase of the mining supercycle. Treasury estimates there will be an extra $120 billion pumped into projects this year to build on the $450bn under way, more than half spent on projects already approved or under construction. The government's projected surplus of $1.5 billion next year won't be enough to stop its outstanding borrowings pushing past the parliament's legislated debt ceiling. The government will pour $76.8 million into the Australian Taxation Office and other agencies involved in Project Wickenby to recoup $210.1m over the next four years. The banks are cutting interest rates. But the average standard variable rate reduction out of the lenders that have announced rate drops is 35 basis points. Westpac chief executive Gail Kelly has urged her fellow business leaders to work with Prime Minister Julia Gillard more co-operatively rather than engaging in combat on issues such as the carbon tax and the budget. Australian building activity has continued to slide, due to weak demand and lower workloads, a private study has found. The Australian Industry Group-Housing Industry Association's performance of construction index (PCI) fell 1.3 points to 34.9 in April. Australia's trade deficit widened in March, meeting expectations of an increased deficit, according to data from the Australian Bureau of Statistics. The Reserve Bank has downgraded its expectations for the housing market, delivering a downbeat assessment.